Nike’s Annual Report Analysis
From Nike’s financial report for the last few years, it has shown significant performance improvement. The company’s distinctive innovation and technological advantage provide it with a tremendous competitive advantage with accelerated growth in its overall portfolio. Further, the quality brand has fueled its loyal customer’s positive relationship across the globe. In this report, an insight into Nike’s gross performance is provided based on the 2019 annual report.
Wire (2020) revealed that in the fourth quarter of 2019 financial year that ended on 31st May, the company registered an increase in revenue by 4%, amounting to $10.2 billion. The company rose by 10% in the quarter on a currency-neutral basis. The total annual revenue rose by 7% on a reported basis leading to an annual revenue increase of $39.1 billion. As noted by Chairman, President, and CEO of NIKE Company, Mr. Mark Parker, “FY19 was a pivot year for the company as it pursues Consumer Direct Offense” the digital advantage made the company progress in its revenue.
In the same quarter, earnings per share were recorded as $0.62 brought about by revenue growth. This indicates an exponential gross margin increase and an average share count. A small average share count was offset through massive selling and tax rate. The full-year diluted earnings per share amounted to $2.49. It is noted that the paramount growth was driven by strategic transformation amid business risks such as exchange volatility and exchange rate fluctuations. Revenues for converse in the FY2019 amounted to $491 million on a currency-neutral basis, and this was associated with double-digit growth registered in Asia.
Wire (2020) noted that NIKE Inc further had an increase in gross margin fourth quarter by 80 bases that accounted for a 45.5% increase. Despite the higher product costs and high cost of supply chain investments, gross margin rose due to the rise in selling prices and desirable changes from external currencies. Due to high revenue growth and expansion in annual gross margin, the net income increased to $989 million. On 31st December 2019, the financial year ended with a total annual net income of $4 billion, with total inventories amounting to $5.6 billion. This represented a 7% boost in inventory levels as compared to the previous year. Based on the report, short-term investment and cash and equivalents amounted to $4.7 billion. This was $582 million less than the 2018 share purchase and dividends. Finally, in the fourth quarter, the NIKE balance sheet shows a repurchase of 10.6 million shares for around $897 million (Wire, 2020). At the end of the accounting period, the company had repurchased 54.3 million shares for a total of $4.3 billion.
From the FY2019 Letter to Shareholders, the CEO message affirmed to shareholders that the company is on track to achieving its ultimate goal more than before. The letter informed the shareholders of the current progress of the firm and possible future opportunities that the company intends to expand. Shareholders were advised of potential investments in the coming FIBA World Cup and World Champion games to increase the firm’s marketing capacities (Shareholder’s Letter, 2020). In the letter, the CEO informed the shareholders of plans to use world Olympic champions such as Eliud Kipchoge for branding marketing as brand ambassadors.
In conclusion, NIKE has shown progressive performance that is more powerful than before. Through its amazing products, digital experiences, an iconic brand, NIKE has expanded its market share by gaining many loyal customers. FY2019, as a defining accounting period for NIKE, and shaped it for the next coming years.
References
Shareholder’s Letter (2020). Retrieved 10th May 2020, from https://s1.q4cdn.com/806093406/files/doc_financials/2019/annual/nike-shareholders-letter-2019.pdf
Wire, B. (2020). NIKE, Inc. Reports Fiscal 2019 Fourth Quarter and Full Year Results. Retrieved 10th May 2020, from https://www.businesswire.com/news/home/20190627005883/en/NIKE-Reports-Fiscal-2019-Fourth-Quarter-Full